Anyone who thinks that the issue of robo-signing is the biggest the housing market has to deal with is gravely wrong. Though foreclosure fraud is admittedly something the market does not need at this point, industry insiders and watchers have more to worry about than the investigation regarding foreclosure proceedings. The still weak (perhaps weakening?) economy coupled with high unemployment rates, low home sales, and tight mortgage underwriting spells a bigger challenge for the market – even more so the continuing decline in prices.

Although generally a low home price spells good things for the economy, things are different given the current housing crisis. With prices remaining depressed, the market fails to garner the tools needed to stabilize. And as if prices are not as depressed as they are, analysts are predicting further drops in home prices.

Market analytics company Fiserv scaled back on its February home price projection. Back then, Fiserv pegged national price gains of around 4% until year ending 2011; this time out, it predicts a drop of 7.1% from June 30 of this year through June 30 of next year. Indeed, after seeing a five-month gain, 20 of the largest metro areas have seen a 0.2% decline in home prices for August – this, according to an S&P/Case-Shiller report.

Though Moody Analytics chief economist Mark Zandi reports that there won’t be any “vicious, self-reinforcing spiral down”, he does admit that prices will still continue with the downward trend. Through the third quarter of 2011, another 8% is to be expected. This means that the total peak-to-trough decline will sit at 34% - and even after 2011, very little price growth is expected for 2012.

Home prices remain low because of a number of factors, number one of which is the low home sales. With the annual rate barely exceeding 307,000, new home sales remain at historic lows. And even with a 10% increase from last month’s number, existing home sales of 4.53 million annualized rates is still way below what was seen during the boom years.

The unemployment rate is also undeniably contributing to the depressed home prices. With people unable to find jobs and hold on to their current jobs, more and more are unable to afford homes or even keep their homes. This keeps supply at a higher rate than the demand.

Though the declining home prices are a cause for worry, Zandi says things just may be looking up. Corporate profits are starting to see a spike. And historically, this means that 8 to 10 months later, companies will start hiring again.